Active ETFs Are Ready for Liftoff after SEC Rule Change
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Monday, December 31, 2012

Active ETFs Are Ready for Liftoff after SEC Rule Change

Now that SEC has cleared the way for active ETFs that use derivatives, how will the industry change?

Wall Street Journal reporter Joe Light expects to see a "blossoming" in the active ETF field, but thinks that asset managers may use this rule change to pump up the risk in their portfolios.

Earlier this month, SEC investment management head Norm Champ announced that the agency is lifting the nearly three-year moratorium on approving active ETFs that use derivatives, a common practice for active ETF managers. Light writes that firms including OppenheimerFunds and Vanguard wrote letters to the agency urging it to remove this restriction on new products.

The WSJ thinks this regulatory change could finally spur the active ETF business to the growth that analysts have long expected to see. And Morningstar analyst Robert Goldsborough feels the same.

"This definitely gives a money manager more flexibility and more options in shaping a portfolio," Goldsborough told the WSJ. "At the margin, it removes an impediment that some money managers might have had that prevented them from moving ahead."

The full Wall Street Journal piece is here

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